International Contract Law.
International Contract Law.
Mr. Marco Tupponi Mr. Marco Tupponi
Studio Associato Avv. Marco Tupponi Dott. Giuseppe De Marinis
& Partners
Via Maceri n.25 - 47100 Forlì
Tel +39 0543 33006 - Fax +39 0543 21999 www.tupponi-demarinis.it
www.commercioestero.net
The common law forms a major part of the law of many nations, especially those with a history as British territories or colonies. It is notable for its inclusion of extensive non-statutory law reflecting precedent derived from centuries of judgments by judges hearing real cases.
The opposition between civil law and common law legal systems has become increasingly blurred, with the growing importance of jurisprudence (almost like case law but in name) in civil law countries, and the growing importance of statute law and codes in common law countries (for example, in matters of criminal law, commercial law (the Uniform Commercal Code in the early 1960's) and procedure (the Federal Rules of Evidence in the 1970's)).
Scotland is often said to use the civil law system but in fact it has a unique system which combines elements of an uncodified civil law dating back to the Corpus Juris Civilis with an element of common law long
Common law
Civil law (legal system)
Civil law is system of law that has its origins in Roman law and sets out a comprehensive system of rules, usually codified, that are applied and interpreted by judges. However, modern systems are descendants of the 19th century codification movement, during which the most important codes (most prominently the Napoleonic Code and the BGB) came into existence. The civilian system is by and large the most widely practiced system of law in the world. As discussed in detail below, the civil law systems of Scotland and South Africa are uncodified, and the civil law systems of Scandinavian countries remain largely uncodified.
55
Thus, the difference between civil law and common law lies less in the mere fact of codification, but in the methodological approach to codes and statutes. In civil law countries, legislation is seen as the primary source of law. By default, courts thus base their judgments on the provisions of codes and statutes, from which solutions in particular cases are to be derived. Courts thus have to reason extensively on the basis of general rules and principles of the code, often drawing analogies from statutory provisions to fill lacunae and to achieve coherence. By contrast, in the common law system, cases are the primary source of law, while statutes are only seen as incursions into the common law and thus interpreted narrowly.
…continue
There are, however, certain sociological differences. Civil law judges are usually trained and promoted separately from advocates, whereas common law judges are usually selected from accomplished and reputable advocates. Also, the influence of articles by legal academics on case law
Commercial law
Commercial law or business law is the body of law which governs business and commerce and is often considered to be a branch of civil law and deals both with issues of private law and public law.
Commercial law regulates corporate contracts, hiring practices, and the manufacture and sales of consumer goods.
What are the Sources What are the Sources
of Contract Law ? of Contract Law ?
Common law Common law : judge-made law, as distinguished : judge-made law, as distinguished from laws passed by legislature
from laws passed by legislature
Uniform Commercial Code Uniform Commercial Code (UCC) (UCC) : model code : model code on commercial transactions adopted by all states on commercial transactions adopted by all states
(except Louisiana) (except Louisiana)
Civil or Commercial Code, or specific law in Civil Civil or Commercial Code, or specific law in Civil
Law Law
International Commercial Law International Commercial Law
The Myth of Transnational The Myth of Transnational Commercial Law
Commercial Law
International Contracts and the Myth of International Contracts and the Myth of
a Transnational Contract Law a Transnational Contract Law
International Contracts: How do they differ International Contracts: How do they differ from domestic contracts?
from domestic contracts?
Drafting is in legalese – English jargon Drafting is in legalese – English jargon handed down from contract to contract handed down from contract to contract
References to non national sets of rules – References to non national sets of rules – INCOTERMS, UNIDROIT, UCP 600 etc.
INCOTERMS, UNIDROIT, UCP 600 etc.
Is there a transnational commercial law Is there a transnational commercial law based on English law?
based on English law?
The Style of International The Style of International
Contracts Contracts
International contracts are written in International contracts are written in English
English
International contracts are lengthy and International contracts are lengthy and regulate all thinkable aspects:
regulate all thinkable aspects:
Gender/Singular and Plural Gender/Singular and Plural
Representations and Warranties Representations and Warranties
Notices Notices
Amendments Amendments
Etc. Etc.
Possible Implications of the Possible Implications of the
Contract Style Contract Style
Parties may assume that all aspects of Parties may assume that all aspects of transactions are regulated by the contract transactions are regulated by the contract
Parties may assume that the contract is Parties may assume that the contract is the only regulation
the only regulation
Parties may rely on transnational Parties may rely on transnational commercial law
commercial law
Parties may draft the contract irrespective Parties may draft the contract irrespective
of the governing law (chosen at the end)
of the governing law (chosen at the end)
Firm Offer and National Law Firm Offer and National Law
Romanistic systems of law Romanistic systems of law - Art. 1329 Italian Civil - Art. 1329 Italian Civil Code: Firm offer is binding. Revocation is
Code: Firm offer is binding. Revocation is ineffective
ineffective
Germanic systems of law Germanic systems of law - § 145 German BGB: - § 145 German BGB:
Firm offer is binding. Revocation is ineffective Firm offer is binding. Revocation is ineffective
Common Law systems Common Law systems
USA: Promissory estoppel (irrevocable to the extent it USA: Promissory estoppel (irrevocable to the extent it has induced offeree’s action)
has induced offeree’s action)
UK: Revocable if there is no consideration UK: Revocable if there is no consideration
Contracts can have many names Contracts can have many names
Contract Contract
Agreement Agreement
Purchase Order Purchase Order
Memorandum of Understanding Memorandum of Understanding
Terms and Conditions Terms and Conditions
Appointment Letter Appointment Letter
Handbook (“implied contract”) Handbook (“implied contract”)
License License
Ticket Ticket
Or no name at all…
Or no name at all…
a letter… a letter…
a telephone call… a telephone call…
an e-mail… an e-mail…
Contract Contract : :
“ “ [a]n agreement between two or more persons [a]n agreement between two or more persons which creates an obligation to do or not do a which creates an obligation to do or not do a
particular thing… A legal relationship consisting particular thing… A legal relationship consisting
of the rights and promises constituting an of the rights and promises constituting an
agreement between the parties that gives each a agreement between the parties that gives each a
legal duty to the other and also the right to seek legal duty to the other and also the right to seek
a remedy for the breach of those duties.”
a remedy for the breach of those duties.”
[Black’s Law Dictionary, 6
[Black’s Law Dictionary, 6
ththed.] ed.]
In other words … In other words …
A contract is a legally A contract is a legally
enforceable promise
enforceable promise
Title II: Contracts in General.
Item I: Introductory Provisions.
1321 c.c. Ita. Concept.
A contract is the agreement between two or more parties
to establish, regulate or extinguish a patrimonial legal
relationship among themselves.
1322 c.c. ita Freedom of Contract. –
The parties may freely set out the content of a contract, as long as it is in accordance with the law and
corporative regulations.
Types of Contracts Types of Contracts
(or Agreements) (or Agreements)
Bilateral and Unilateral Contracts Bilateral and Unilateral Contracts
Bilateral Bilateral : both parties make a promise. : both parties make a promise.
Unilateral Unilateral : one party makes a promise that : one party makes a promise that the other party can accept only by doing the other party can accept only by doing
something something
Bilateral vs. Unilateral Express vs. Implied Executory vs. Executed
Valid vs. Unenforceable vs. Voidable vs. Void
Types of Contracts Types of Contracts
Express and Implied Contracts Express and Implied Contracts
Express Express : the two parties explicitly state all : the two parties explicitly state all important terms of their agreement.
important terms of their agreement.
Implied Implied : the words and conduct indicate : the words and conduct indicate that the parties intended an agreement.
that the parties intended an agreement.
Executory and Executed Contracts Executory and Executed Contracts
Executory: when one or more parties has Executory : when one or more parties has not fulfilled its obligations.
not fulfilled its obligations.
Executed Executed : when all parties have fulfilled : when all parties have fulfilled their obligations.
their obligations.
Types of Contracts Types of Contracts
Valid, Unenforceable, Voidable, and Void Valid, Unenforceable, Voidable, and Void Agreements
Agreements
Valid Valid : satisfies the law’s requirements. : satisfies the law’s requirements.
Unenforceable Unenforceable : when the parties intend to form a : when the parties intend to form a valid bargain but some rule of law prevents
valid bargain but some rule of law prevents enforcement.
enforcement.
Voidable Voidable : when the law permits one party to : when the law permits one party to terminate the agreement.
terminate the agreement.
Void: Void: one that neither party can enforce, usually one that neither party can enforce, usually because the purpose is illegal or one of the parties because the purpose is illegal or one of the parties
had no legal authority.
had no legal authority.
1337 c.c. Ita. Talks and Pre-Contractual Liability. –
During the negotiations process and the formation of contract the parties must act in good faith.
1340 c.c. Ita. Clauses of Use. –
The clauses of use are deducted as included in the contract,
if does not come out that they were not wanted by the parties.
1325 c.c. ita Guidelines for Requirements.
The requirements of a contract are:
1. the agreement between the parties;
2. the cause for the contract;
3. the subject-matter of the contract;
4. the form of the contract, as far as is prescribed by the law under penalty of invalidity.
Item II: Requirements of Contract.
Elements of a Contract Elements of a Contract
Agreement Agreement
offer, and offer, and
acceptance acceptance
Consideration Consideration
There has to be bargaining that leads to an There has to be bargaining that leads to an exchange between the parties.
exchange between the parties.
Legality Legality
The contract must be for a lawful purpose. The contract must be for a lawful purpose.
Capacity Capacity
The parties must be adults of sound mind. The parties must be adults of sound mind.
Meeting of the Minds Meeting of the Minds
The parties can form a contract only if they had a The parties can form a contract only if they had a meeting of the minds.
meeting of the minds.
They must understand each other and intend to They must understand each other and intend to reach an agreement.
reach an agreement.
A judge will make an A judge will make an objective objective assessment of any assessment of any disagreements about whether a contract was made disagreements about whether a contract was made -- whether or not a
-- whether or not a reasonable person reasonable person would would
conclude that there was an agreement, based on conclude that there was an agreement, based on the parties’ conduct.
the parties’ conduct.
Objective Theory of Contract: Objective Theory of Contract: Lucy v. Zehmer Lucy v. Zehmer
Negotiation Terms Negotiation Terms
JOE JOE BOB BOB Offer
Offer Accept or Accept or Reject Reject or or
Accept or
Accept or Counteroffer Counteroffer Reject or
Reject or
Counteroffer
Counteroffer
Section I: Agreement Among The Parties.
1326 c.c. ita Contract Conclusion.
–A contract is concluded when the proponent party is informed about the other parties’ acceptance.
The acceptance must arrive within the term established by the proponent, or (within) the term necessary as a rule depending on the nature
of business, or according to uses.
The proponent may consider effective a belated acceptance as long as he promptly forewarns the other party.
If the proponent asks for a particular fo rm of contract, acceptance by
the other parties has no effect if it is given in another form.
An acceptance which does not conform to the proposition is equivalent to a new proposition.
What are the What are the
Elements of a Contract?
Elements of a Contract?
In Common Law In Common Law
Offer Offer
Acceptance Acceptance
Consideration Consideration
Mutuality Mutuality
Offer Offer : :
A proposal to do a thing or pay an amount, A proposal to do a thing or pay an amount, usually accompanied by an expected
usually accompanied by an expected
acceptance, counter-offer, return promise acceptance, counter-offer, return promise
or act or act
The offeror is the “master of his offer”. The offeror is the “master of his offer”.
Offer Offer
Problems with Intent Problems with Intent
Invitation to bargain is not an offer. Invitation to bargain is not an offer.
Price quote is generally not an offer. Price quote is generally not an offer.
An advertisement is generally not an offer. An advertisement is generally not an offer.
Placing an item up for auction is not an offer, it Placing an item up for auction is not an offer, it is merely a request for an offer.
is merely a request for an offer.
Problems with Definiteness Problems with Definiteness
The term of the offer must be definite. The term of the offer must be definite.
An offer is an act or statement that proposes
definite terms and permits the other party to
create a contract by accepting those terms.
Termination of Offers Termination of Offers
Termination by Revocation Termination by Revocation
Effective when the offeree receives it. Effective when the offeree receives it.
Firm Offers and Revocability Firm Offers and Revocability
Common Law Rule Common Law Rule
Revocation of a firm offer is effective if the offeree Revocation of a firm offer is effective if the offeree receives it before he accepts.
receives it before he accepts.
Option Contract Option Contract
The offeror may not revoke an offer during the option The offeror may not revoke an offer during the option period.
period.
Sale of Goods Sale of Goods
A writing signed by a merchant, offering to hold an A writing signed by a merchant, offering to hold an offer open, may not be revoked.
offer open, may not be revoked.
Termination of Offers Termination of Offers
Termination by Rejection Termination by Rejection
If an offeree rejects an offer, the rejection If an offeree rejects an offer, the rejection
immediately terminates the offer. A counteroffer immediately terminates the offer. A counteroffer
operates as a rejection.
operates as a rejection.
Termination by Expiration Termination by Expiration
When an offer specifies a time limit for When an offer specifies a time limit for acceptance, that period if binding.
acceptance, that period if binding.
If the offer specified no time limit, the offeree If the offer specified no time limit, the offeree has a reasonable period in which to accept.
has a reasonable period in which to accept.
Irrevocable offer Irrevocable offer
” ” This offer is binding on the Offeror and This offer is binding on the Offeror and cannot be revoked before 30 days have cannot be revoked before 30 days have
elapsed from the date hereof”
elapsed from the date hereof”
May the offer be revoked within the 30 May the offer be revoked within the 30 days term?
days term?
Acceptance Acceptance : :
Compliance by the offeree with terms and Compliance by the offeree with terms and conditions of an offer
conditions of an offer
A manifestation of assent to terms of offer A manifestation of assent to terms of offer in a manner invited or required by the offer in a manner invited or required by the offer
The offer and acceptance must match The offer and acceptance must match (“mutuality” …more on this soon…)
(“mutuality” …more on this soon…)
Acceptance Acceptance : :
Does
Does not not necessarily occur only by necessarily occur only by signature of a contract
signature of a contract
Acceptance can occur by:
Acceptance can occur by:
Action Action -using goods -using goods
-opening the package (software) -opening the package (software)
-entering an establishment or participating in -entering an establishment or participating in an activity
an activity
Inaction – Inaction – not not returning goods returning goods
Acceptance Acceptance : :
Sometimes acceptance does not appear Sometimes acceptance does not appear
“voluntary,” but it is still sufficient
“voluntary,” but it is still sufficient Contracts of Adhesion:
Contracts of Adhesion:
-- “Take it or leave it” terms -- “Take it or leave it” terms
-- Not bargained for
-- Not bargained for
Acceptance Acceptance
The offeree must say or do something The offeree must say or do something to accept.
to accept.
In a In a bilateral bilateral contract, the offeree generally contract, the offeree generally must accept by making a promise.
must accept by making a promise.
In a In a unilateral unilateral contract, the offeree must contract, the offeree must accept by performing.
accept by performing.
Mirror Image Rule (Common Law) Mirror Image Rule (Common Law)
Requires that acceptance be on precisely Requires that acceptance be on precisely the same terms as the offer.
the same terms as the offer.
Normile v. Miller Normile v. Miller
Communication of Acceptance Communication of Acceptance
Wucherpfennig v. Dooley Wucherpfennig v. Dooley
and Manner of Acceptance and Manner of Acceptance
If an offer demands acceptance in a particular If an offer demands acceptance in a particular medium or manner, the offeree must follow those medium or manner, the offeree must follow those
requirements.
requirements.
If the offer does not specify a type of acceptance, If the offer does not specify a type of acceptance, the offeree may accept in any
the offeree may accept in any reasonable manner reasonable manner and medium.
and medium.
Time of Acceptance: The Mailbox Rule Time of Acceptance: The Mailbox Rule
An accceptance is generally effective upon dispatch, An accceptance is generally effective upon dispatch, meaning the moment it is out of the offeree’s control.
meaning the moment it is out of the offeree’s control.
Consideration Consideration : :
Something of legal value; anything that Something of legal value; anything that induces you to give up something
induces you to give up something
May be something other than money May be something other than money (i.e., a promise to do something;
(i.e., a promise to do something;
a promise to refrain from doing a promise to refrain from doing something)
something)
Consideration Consideration
Bargaining that leads to an exchange of Bargaining that leads to an exchange of value between the parties.
value between the parties.
Consideration can be anything that Consideration can be anything that
someone might want to bargain for. It is someone might want to bargain for. It is the the inducement inducement to make the deal, or the to make the deal, or the
thing that is bargained-for thing that is bargained-for . .
McInerny v. Charter Golf McInerny v. Charter Golf
A Bargain and an Exchange A Bargain and an Exchange
The thing bargained for can be: The thing bargained for can be:
another promise or action. another promise or action.
a benefit to the promisor or a detriment to the a benefit to the promisor or a detriment to the promisee.
promisee.
a promise to do something or a promise to a promise to do something or a promise to refrain from doing something.
refrain from doing something.
“ “ Bargaining is obligating yourself in Bargaining is obligating yourself in order to induce the other side to order to induce the other side to
agree.”
agree.”
Mutuality Mutuality : :
A “meeting of the minds” with respect to A “meeting of the minds” with respect to material contract terms
material contract terms
A signature is deemed to be sufficient to A signature is deemed to be sufficient to evidence this requirement
evidence this requirement
Therefore, it is crucial that you read carefully Therefore, it is crucial that you read carefully and understand all of the terms of a contract and understand all of the terms of a contract
before
before you sign it you sign it
Mutuality of Obligations Mutuality of Obligations
Illusory Promise Illusory Promise
If one party’s promise is conditional, the other party If one party’s promise is conditional, the other party is not bound to the agreement.
is not bound to the agreement.
Promise to pay in return for past favors. Promise to pay in return for past favors.
Passante v. McWilliam Passante v. McWilliam
Contract Clauses to Include (cont.) Contract Clauses to Include (cont.)
Liability Protections Liability Protections
Defense & Indemnification Defense & Indemnification
Insurance Insurance
Termination Termination
Dispute Resolution Dispute Resolution
Litigation; Arbitration; Mediation Litigation; Arbitration; Mediation
Governing Law Governing Law
Forum – What court? Where? Forum – What court? Where?
Amendments to a contract Amendments to a contract
” ” The parties hereby agree to modify clause XX The parties hereby agree to modify clause XX of the contract entered into by and between the of the contract entered into by and between the
parties hereto on [date] for the sale of YY parties hereto on [date] for the sale of YY
(hereinafter the ”Contract”), so that the price to (hereinafter the ”Contract”), so that the price to
be paid by the Buyer shall be ZZ instead of WW.
be paid by the Buyer shall be ZZ instead of WW.
All other terms and conditions of the Contract All other terms and conditions of the Contract
remain unchanged and continue to be fully valid remain unchanged and continue to be fully valid
and binding on the parties.”
and binding on the parties.”
Is the amendment valid? Is the amendment valid?
Amendments to a Contract and Amendments to a Contract and
National Law National Law
Romanistic systems: Romanistic systems: amendment is valid amendment is valid
Germanic systems Germanic systems : amendment is valid : amendment is valid
Common law systems Common law systems : amendment is valid : amendment is valid only if there is consideration
only if there is consideration
Choice of law clause
A choice of law clause or proper law clause in a contract is one in which the parties specify which law (i.e. the law of which state or nation if it only has a single legal system) will be applied to resolve any disputes arising under the contract.
In Conflict of Laws, the Latin term lex fori literally means the "law of the forum" and it is distinguished from the lex causae which is the law the forum actually applies to resolve the particular case.
Lex fori
Forum shopping
Forum shopping is the informal name given to the practice adopted by some plaintiffs to get their legal case heard in the court thought most likely to provide a favourable judgment, or by some defendants who seek to have the case moved to a different court
Forum selection clause
A forum selection clause in a contract with a Conflict of Laws element allows the parties to agree that any litigation resulting from that contract will
Arbitration
Arbitration is a legal technique for the resolution of disputes outside the courts, wherein the parties to a dispute refer it to one or more persons (the "arbitrators" or "arbitral tribunal"), by whose decision (the "award") they agree to be bound. In the United States, the term is also used to refer to non-binding arbitration, a process in which the final award does not bind the parties.
Arbitration is today most commonly used for the resolution of commercial disputes, particularly in the context of international commercial transactions. It is also used in some countries to resolve other types of disputes, such as labour disputes, consumer disputes or family disputes, and for the resolution of certain disputes between states and between investors and states.
What form must a contract What form must a contract
take to be a legally take to be a legally
enforceable?
enforceable?
Does an agreement between two or Does an agreement between two or more parties have to be in writing in more parties have to be in writing in
order to be enforceable in a court of law?
order to be enforceable in a court of law?
A Contract Can Be Written or Oral A Contract Can Be Written or Oral
in USA in USA
Certain contracts Certain contracts must must be in writing: be in writing:
Contracts for the sale of goods over $500 Contracts for the sale of goods over $500
Contracts for the sale of real property Contracts for the sale of real property
Contracts that are incapable of being Contracts that are incapable of being performed within 1 year
performed within 1 year
Promises to answer for or discharge the debts Promises to answer for or discharge the debts of another (Guarantee)
of another (Guarantee)
Written and Oral Contract Terms Written and Oral Contract Terms
(cont.) (cont.)
Evidence
Evidence questions questions become crucial if become crucial if there is a contract dispute
there is a contract dispute
A contract is only as good as what you A contract is only as good as what you
can later
can later prove prove to be the terms of the to be the terms of the contract
contract
1341 c.c. Ita. General Terms of Contract. –
The general terms of contract are arranged by one of the contracting parties.
They are effective to the other contracting party if at the time of formation of contract the other contracting party was or
should have been aware of them, according to ordinary diligence.
In any case they have no effect unless the following terms are specifically approved in writing:
the limitation of liability, the right of rescission, and the performance of contract suspension, that is to say they rule
forfeitures in charge of the other contracting party, limits to the right of objecting exceptions, restrictions to the freedom of contract with
What is “boilerplate” in a What is “boilerplate” in a
contract?
contract?
Is it different from “legalese”?
Is it different from “legalese”?
Is it necessary to read and Is it necessary to read and
negotiate “boilerplate” or negotiate “boilerplate” or
“legalese”?
“legalese”?
… … the 70-page Confidentiality Agreement the 70-page Confidentiality Agreement that was all “just boilerplate”…
that was all “just boilerplate”…
Battle of the Forms Battle of the Forms
Modern business transactions are often Modern business transactions are often conducted primarily through forms
conducted primarily through forms Example:
Example: Bob decides to buy a computer Bob decides to buy a computer
Purchasing sends a purchase order to the vendor Purchasing sends a purchase order to the vendor containing standard terms and conditions that are containing standard terms and conditions that are favorable to Bob
favorable to Bob
After receiving the order, vendor sends a written After receiving the order, vendor sends a written
acceptance or confirmation of the order on its form
acceptance or confirmation of the order on its form
which contains the basic contract terms and a series
which contains the basic contract terms and a series
of pre-printed terms that are favorable to the vendor
of pre-printed terms that are favorable to the vendor
This is where the Battle Begins…
This is where the Battle Begins…
If there is a contract dispute, which form will If there is a contract dispute, which form will prevail?
prevail?
Common law: the acceptance must mirror the precise Common law: the acceptance must mirror the precise terms of the offer and any variance from that
terms of the offer and any variance from that
constitutes a rejection of the offer or a counteroffer constitutes a rejection of the offer or a counteroffer
UCC: says that, on premise that both parties UCC: says that, on premise that both parties
recognize a contract despite their clashing forms, a recognize a contract despite their clashing forms, a contract is formed, unless the vendor specifically contract is formed, unless the vendor specifically
states that there shall be no contract unless his set of
states that there shall be no contract unless his set of
… … continues continues
If If : the offeree’s (vendor) response contains : the offeree’s (vendor) response contains terms
terms additional additional to those contained in Bob’s to those contained in Bob’s original offer (purchase order)
original offer (purchase order)
Then Then : a contract exists consisting of the terms : a contract exists consisting of the terms on which the offer and acceptance agree
on which the offer and acceptance agree
The additional terms are merely a proposal for The additional terms are merely a proposal for additions to the contract
additions to the contract
… … and ends and ends
If If : the offeree’s response contains terms which : the offeree’s response contains terms which are are inconsistent inconsistent with the original offer with the original offer
Then Then : the court looks at the parties’ conduct to : the court looks at the parties’ conduct to determine whether they acted as though a
determine whether they acted as though a contract was formed
contract was formed
If so, the conflicting terms cancel each other out and If so, the conflicting terms cancel each other out and necessary terms are provided by the UCC or custom.
necessary terms are provided by the UCC or custom.
Section IV: Procedures of Contract
1351 c.c. Ita. Pre-Contract. –
The pre-contract is null and void unless it respects the same form prescribed by the law
for the final contract.
Is a “Memorandum of Understanding” a Is a “Memorandum of Understanding” a
contract?
contract?
Is a “Letter of Intent” a contract?
Is a “Letter of Intent” a contract?
What is apparent authority?
What is apparent authority?
Who May Sign A Contract?
Who May Sign A Contract?
Only those individuals who have been Only those individuals who have been
expressly delegated signature authority or expressly delegated signature authority or
management management
Unauthorized individuals who sign contracts Unauthorized individuals who sign contracts expose themselves to possible personal
expose themselves to possible personal liability
liability
Challenges, Challenges,
Problems Problems
&
&
Pitfalls
Pitfalls
Potential Contract Pitfalls Potential Contract Pitfalls
Not reading and understanding the Not reading and understanding the contract
contract
Not negotiating and documenting the Not negotiating and documenting the contract’s terms
contract’s terms
Potential Contract Pitfalls Potential Contract Pitfalls
Disclaimers or limitations on the other party’s Disclaimers or limitations on the other party’s performance; disclaimers of warranties, etc.
performance; disclaimers of warranties, etc.
Any clause permitting the other party to change Any clause permitting the other party to change contract terms without the permission in writing contract terms without the permission in writing
Failure to specify all terms, documents, etc. that Failure to specify all terms, documents, etc. that are included in the contract or failure to show
are included in the contract or failure to show
acceptance (i.e., signing or initialing changes)
acceptance (i.e., signing or initialing changes)
Potential Contract Pitfalls (cont.) Potential Contract Pitfalls (cont.)
Reference to terms Reference to terms
Indemnification, Liability Releases, Limits Indemnification, Liability Releases, Limits on Other Party’s Liability
on Other Party’s Liability
Potential Contract Pitfalls (cont.) Potential Contract Pitfalls (cont.)
Termination of Contract Termination of Contract
Excessive opportunity for the other party to Excessive opportunity for the other party to cure its breaches of the contract
cure its breaches of the contract
Excessive or unreasonable penalties imposed Excessive or unreasonable penalties imposed for terminating the contract
for terminating the contract
Dispute Resolution in distant locations Dispute Resolution in distant locations (other party’s home city and state) and (other party’s home city and state) and
under laws of a distant state (other party’s
under laws of a distant state (other party’s
What if a contract is What if a contract is
breached?
breached?
Section II: Penal Clause and Deposit
1382 c.c. Ita. Effects of Penal Clause. –
The clause, which lays down that in case of non-fulfilment or belated fulfilment of thecontract one of the contracting parties is due to supply a certain consideration, produce the effect of reducing the compensation to the consideration promised, if a further damage has not been agreed.
1385 c.c. Ita. Confirmation Deposit. –
When a contract is formed, if one party gives to another a certain amount or quantity of fungible things as a deposit, this must be returned or imputed to the consideration due in case of fulfilment.
If the party who gives the deposit defaults, the other may back out
of the contract holding the deposit back; if the defaulting party is the one who receives the deposit, the other may back out of the contract and collect double the deposit.
Remedies for Breach of a Contract Remedies for Breach of a Contract
Money Damages Money Damages
Compensatory: actual or real damages; compensate Compensatory : actual or real damages; compensate for the injury sustained and nothing more
for the injury sustained and nothing more (“benefit of the bargain”)
(“benefit of the bargain”)
Punitive Punitive : damages to punish the defendant or set an : damages to punish the defendant or set an example for similar wrongdoers
example for similar wrongdoers
Nominal Nominal : token amount of money because of technical : token amount of money because of technical wrong but no actual damages
wrong but no actual damages
What are liquidated damages?
What are liquidated damages?
Remedies Remedies
Money Damages (cont.) Money Damages (cont.)
Consequential Consequential : damage, loss or injury that : damage, loss or injury that
doesn’t flow directly and immediately from the doesn’t flow directly and immediately from the
act, but only from some of the consequences act, but only from some of the consequences
or results of such act or results of such act
Liquidated Liquidated : specific sum of money expressly : specific sum of money expressly stipulated by the parties in the contract to
stipulated by the parties in the contract to cover damages
cover damages
Remedies Remedies
Specific Performance Specific Performance
Money damages aren’t adequate to give the Money damages aren’t adequate to give the plaintiff the “benefit of the bargain”
plaintiff the “benefit of the bargain”
Remedy used if the item is unique, such as a piece Remedy used if the item is unique, such as a piece of property or artwork
of property or artwork
So, the defaulting party is required to perform So, the defaulting party is required to perform its obligations under the contract
its obligations under the contract
Item XIV: Resolution of Contract.
Section I: Resolution by Reason of Breach.
1453 c.c. Ita. Resolution of Contract by Reason of Breach. –
Contracts which provide for fair and valuable considerations enable the fulfiller contracting party to exact the defaulting party
the performance, or the resolution, of the contract, unless in any case a compensation.
The resolution may be exacted even when the action
has been promoted in order to get the fulfilment but not vice versa.
The defaulting party cannot fulfil its obligation once the date of the resolution claim has been communicated
1456 c.c. Ita. Explicit Resolutive Clause. –
The parties may explicitly agree that the contract
is to be rescinded if a particular obligation is not fulfilled according to the agreed procedures.
In this case the rescission is determined by right when the party concerned declares to the other
its intention to make use of the avoidance clause.
Section II: Supervening Impossibility i.e. Force Majeure
1463 c.c. Ita. Complete Impossibility. –
In contracts which provide for fair and
valuable considerations, the party freed on account
of the supervening impossibility of the due performance
cannot exact the action for money had and received.
Force Majeure Force Majeure
” ” The usual Force Majeure clauses to The usual Force Majeure clauses to apply”
apply”
Does governing law provide with force Does governing law provide with force majeure regime?
majeure regime?
Does governing law not provide with force Does governing law not provide with force majeure regime?
majeure regime?
Definition of Force Majeure and Definition of Force Majeure and
National Law National Law
Romanistic systems Romanistic systems : Art. 1218, 1463 Italian Civil : Art. 1218, 1463 Italian Civil Code Code
Germanic systems Germanic systems : § 275 German BGB : § 275 German BGB
Common Law Common Law : Clause is void for uncertainty – : Clause is void for uncertainty – force majeure is not a legal term under English force majeure is not a legal term under English
law. Contractual obligations are absolute;
law. Contractual obligations are absolute;
exception: frustration
exception: frustration
Partial Impediment Partial Impediment
” ” Non performance by a party of its Non performance by a party of its
obligations hereunder is excused if such obligations hereunder is excused if such
party was prevented from fulfilling its party was prevented from fulfilling its
obligations by an event beyond that party’s obligations by an event beyond that party’s
control, that was not foreseen at the date control, that was not foreseen at the date
hereof and that could not be reasonably hereof and that could not be reasonably
avoided or overcome.”
avoided or overcome.”
Partial Impediment and National Partial Impediment and National
Law Law
Romanistic systems Romanistic systems : Art. 1464 Italian Civil Code: : Art. 1464 Italian Civil Code:
Partial Excuse Partial Excuse
Germanic systems: § 275 German BGB Germanic systems: § 275 German BGB
Common Law Common Law : Frustration kills the contract. : Frustration kills the contract.
Partial frustration does not exist
Partial frustration does not exist
Section III: Hardship Clause.
1467. Contracts With Performance Considerations. –
In continuing contracts, that is to say in future contracts,
if the consideration of one of the parties has become exceedingly onerous because of exceptional and unforeseeable events, the party who owes such consideration may exact the rescission
of the contract, bex art.1458.
The rescission cannot be exacted if the supervening unconscionability is part of the risk in the contract.
The party asked to rescind the contract may propose a fair alteration of the contract.
Item V: Effects of Contract
Section I: General Provisions
1376 c.c. Ita. Contract With Real Effects. –
If the subject-matter of a contract is the transfer
of property of a particular thing, the constitution or the transfer of interest, that is to say
the transfer of another interest, property or interest
are transferred and acquired if the parties lawfully agree.
Rome Convention (contract)
In Conflict of Laws, the Rome Convention is the Convention on the Law Applicable to Contractual Obligations and it opened for signature in Rome on 19th June 1980.
NOW this Convention is substitued from the Reg. n. 593/17 june 2008
The intention is to create at least a harmonised if not a unified body of law within the European Union.
Express selection
Article 3 states the general rule that the parties to a contract have freedom of choice over the Applicable Law. To exercise this choice either express words may be used or the intention should be demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case. The law chosen may apply to the whole or only a part of the contract, and the choice is not irrevocable. The parties can at any time agree to change the Applicable Law and any such variation will not prejudice the formal validity of the agreement nor adversely affect the rights of third parties. But, although the parties do not need to match the Applicable Law and the forum given jurisdiction, the choice of law cannot be used to evade the mandatory provisions of the state most closely connected with the agreement.
Implied selection
If there is no express choice, Article 4 provides that the contract shall be governed by the law of the country with which it is most closely connected.
If the agreement is severable, two Applicable Laws may be selected. For these purposes, it is presumed that the contract is most closely connected with the lex loci solutionis, i.e. the law of the place where the contract is to be performed, or the law of the habitual residence of the person who is to perform, or, in the case of a body corporate or unincorporate, where its central administration is located.
…continue
where the subject matter of the agreement is immovable property, the lex situs will apply; and
contracts for the carriage of goods and charter-parties are governed by the law of the place in which, at the time the contract is concluded, the carrier has his principal place of business if that is also the place in which loading or discharge is to occur or the place where the consignor has his or her principal place of business,.
However, if it is a commercial or professional contract, the Applicable Law will be the law of the place in which the principal place of business is situated or, where under the terms of the contract the performance is to be effected through a place of business other than the principal place of business, the country in which that other place of business is situated except that there is a rebuttable presumption:
Agency (law)
Agency is an area of Commercial law dealing with a contractual or quasi- contractual tripartite set of relationships when an Agent is authorised to act on behalf of another (called the Principal) to create a legal relationship with a Third Party.
This branch of law separates and regulates the relationships between:
Agents and Principals
Agents and the Third Parties with whom they deal on their Principals' behalf;
Principals and the Third Parties when the Agents purport to deal on their behalf.
The concepts
The reciprocal rights and liabilities of Principal and Agent reflect commercial needs and legal realities. In any business of size, it is not possible for one person to travel everywhere to negotiate all the transactions necessary to maintain or grow the business.
These problems are increased if the business is a corporation, because it is then a fictitious legal person and, as such, it can only act through human agents.
Hence, independent people are contracted by businesses to buy and sell goods and services on behalf of those businesses.
When agreements are made, the Principal is liable under the contract(s) made by the Agent. So long as the Agent has done what he or she was instructed to do, the result is the same as if the Principal had done it directly.
Brief statement of legal principles
There are three broad classes of Agent:
1. Universal Agents hold broad authority to act on behalf of the Principal, e.g. they may hold a power of attorney (also known as a mandate in civil law jurisdictions) or have a professional relationship, say, as lawyer and client.
2. General Agents hold a more limited authority to conduct a series of transactions over a continuous period of time;
3. Special Agents are authorised to conduct either only a single transaction or a specified series of transactions over a limited period of time.
Authority
For these purposes, the Principal must give, or
be deemed to give, the Agent authority to act.
Principal (law)
In Commercial Law, a Principal is a person, fictitious or otherwise, who authorises an Agent to act to create one or more legal relationships with a Third Party. This branch of law is called Agency
Liability of Agent to Principal
If the Agent has acted without actual authority, but the Principal is nevertheless bound because the Agent had apparent authority, the Agent is liable to indemnify the Principal for any resulting loss or damage.
Liability of Principal to Agent
If the Agent has acted within the scope of the actual authority given, the Principal must indemnify the Agent for payments made during the course of the relationship whether the expenditure was expressly authorised or merely necessary in promoting the Principal’s business.
Liability of Agent to Third Party
If the Agent has actual or apparent authority, the Agent will not have liability on any transactions agreed within the scope of that authority so long as the Principal was disclosed, i.e. the fact of the agency was revealed and the identity of the Principal revealed.
But where the agency is undisclosed or partially disclosed, both the Agent and the Principal are bound.
Where the Principal is not bound because the Agent had no actual or apparent authority, the purported Agent is liable to the Third Party for breach of the implied warranty of authority
